ESG Performance, Capital Occupation in Supply Chain and Firm Value

Résumé du livre

This study examines whether ESG affects capital occupation in supply chain and firm value using a dataset of Chinese-listed firms. We demonstrate that focal firm with better ESG performance extend their receivable periods to customers and has access to longer payable periods provided by suppliers. It is still robust when we deal with endogeneity using lagged dependent variables, 2SLS with instrumental variables, Heckman's two-stage test and an alternative ESG variables. The underlying mechanism suggests that this effect is predominantly driven by social performance (S), corporate governance (G) dimensions and better environmental performance (E), and we find two potential channels for this effect: information and social trust. Cross-sectional analysis suggests that these effects are pronounced for firm that are financially constrained, firms having weak bargaining power or little social connection, firms that are not state-owned and when a financial crisis occurs. Lastly, we demonstrate that ESG indirectly improves firm value through increasing in capital occupation in supply chain. Overall, these results prove the importance of firm's ESG performance in supply chain financing, and provides a supply chain channel through which ESG creates firm value in emerging markets.